Nice camera.
I wouldn't say the greatest step because the technology behind the camerawasn't new, self capping focal plane shutters had been around for quite a few years.
What was important was the miniaturisation and reliability and the introduction of 35mm format for still photography. Leitz weren't the first to market a 35mm camera, rather the first to offer a practical range of interchangeable lens rangefinder cameras, after the first fixed lens versions some with leaf shutters.
More importantly other companies like Hugo Meyey made high quality lenses like a 50mm f1.5 Plasmat for them (your model) before Leitz themselves, Meyer also sold Leitz cameras. £17 5s for a 1a with a 50mm f3.5 Elmar, £39 with a Meyer 50mm f1.5 Plasmat, in 1930.
A link often missed is the huge improvement in film emulsions that occurred just after the introduction of Leicas particularly in Europe. Ilford and Agfa were way ahead of Eastman Kodak, Ilford'd Fast Pan Chromatic and Hypersensitibe Panchromatic films (& plates) came out in 1933/4 and were the first generation of modern thinner fine grained emulsions. Kodak introduced a new equivalent range of films to catch up Pan-X, Plus-X Super-XX & Tri-X in 1939 but had already been beaten to it by Ilord FP2 and HP2 in 1937.
It was the move to 35mm in Europe that spurred emulsion improvements but there was also a parallel change in the way films were exposed and developed, new "fine grain" developers were introduced as well. Hans Windisch in "Die Neu Foto Schule" also published in English as The New Photo School" and various Leica publications were at the forefront of the new ways of working. Essentially this was more accurate exposure and no over development as both over exposure and development increased grain and also sharpness so resolution. It did help that accurate exposure meters were just being introduced and Gossen advertised meters in the first copies of The New Photo School. It's the way we still work.
So that step change is really a number of coinciding changes that allowed 35mm to thrive and become accepted.
Ian